1. As the name suggests, convertible bonds allow the owner the option to convert the bonds into a fixed number of shares of common stock.

Innovative Energy LLC is a start-up company that just raised $100,000 to conduct a third-party feasibility study on its business model. The company agreed to treat the $100,000 investment as debt at 10% interest rate; however, the investor has the right to exchange the debt for common stock during the companys next financing round. Which of the following terms best describes the $100,000 investment?

Convertible bond

Warrant

2. Consider the case of an investor, Nazim:

Nazim wants to include bonds in his investment portfolio, but he wants the option to sell the bond to the issuer at a specified price on a certain date before the maturity of the bond. Which of the following bond redemption features should he pick?

Putable bond

Convertible bond

3. Nazim also recently bought bonds with a clause stating that interest will be paid based on the inflation rate. When the inflation rate increases, the interest on the bonds will also increase. Nazim has invested in INCOME OR INDEXED BONDS ?